Both the United States and China have maintained their tense stance, but investors increasingly view the situation as an “escalation to de-escalate.” The currency market has partially reversed Friday’s moves, with the dollar-bloc currencies and the Norwegian krone regaining ground, while the euro, sterling, and yen have given up some of their previous gains. Emerging market currencies are mixed, with the Taiwanese dollar and South Korean won underperforming. The PBOC surprised markets by setting the dollar reference rate at its lowest point since last November, while China’s September trade data showed stronger-than-expected export and import growth, reflecting a resilient external sector.

Asia Pacific Markets

Japanese trading floors were quiet due to a national holiday, but elsewhere in Asia, currencies and equities were active. The yen’s movement remained confined within last week’s broad range, as the dollar hovered near JPY152 after a sharp reversal before the weekend. The fall in U.S. yields and cautious signals from Japan’s finance ministry led traders to trim long dollar positions.
In Australia, the local dollar recovered slightly after being the weakest among major currencies last week, when it slipped to its lowest since August near $0.6480. Today’s modest rebound toward $0.6535 recoups part of its earlier losses, though resistance remains around $0.6540.

European Markets

The euro had briefly strengthened as U.S.-China frictions escalated, climbing from its early-week low near $1.1540 to $1.1630 before losing momentum. Its pullback today toward $1.1580 reflects renewed caution after the Netherlands moved to assert control over Nexperia, a Chinese-owned semiconductor firm, invoking national security rules. France also drew attention, as Prime Minister Lecornu was reappointed and a new cabinet announced ahead of a confidence vote.
Sterling, meanwhile, regained some footing after touching a two-month low around $1.3260, climbing back above last month’s trough near $1.3330. The pound now faces support around $1.3315, with traders eyeing tomorrow’s UK employment report for direction.

American Markets

With U.S. banks and bond markets closed for a holiday, equities are the only active arena today. Although U.S.-China trade frictions persist, investors appear less alarmed, anticipating that potential talks between Presidents Trump and Xi later this month might ease tensions. Still, the absence of a confirmed summit highlights the fragile state of relations, as new port levies take effect tomorrow. The Dollar Index remains steady within its recent range, hovering between 98.70 and 99.55. Friday’s modest inside day left traders watching key resistance near 99.45 and support below 98.70, as the greenback continues to trade firmly within pre-weekend boundaries